The Evaporation Theory Part 2: Government and Taxes

Think about it–up to 40% of your earnings seemingly evaporates from every paycheck! Last year, we published the first part in our Evaporation Theory, a living thesis on where the trail of money disappears and, thus, where we should look to invest into companies realigning the relative stack and extracting disproportionate economic rent. Then wetalked about insurance and our investment in Embroker. Today, we discuss a second route–governments and municipal finance.

First, we must congratulate Jase Wilson and the team at Neighborly on raising their significant Series A (you can also read about the raise in Fortune magazine, here). We’re honored to partner with Drew Oetting and Joe Lonsdale of 8VC, who have supported the team and mission almost as long as Bee. Big thanks to them for also believing in the mission.

It’s been an amazing ride so far, and kudos to the Neighborly team for sticking to their BHAG (big, hairy, audacious goal) of changing the face of municipal finance. Oftentimes startups move fast, break things, and ask for permission later. Not in this case. The team had to go straight in the front door and spent three years building towards their first municipal offering.

When we first met Jase, he told us all a story about how the Golden Gate Bridge was built during the Great Depression. Residents of San Francisco flocked to the courthouse steps to bid live on bridge bonds. They werevoting to tax themselves to build this iconic structure to nowhere, hoping that the tolls and general obligations from taxpayers would cover the cost and ongoing maintenance for the next 100 years. Theyliterally raised their hands and were issued pieces of paper in exchange for turning over their hard-earned dollars. Direct infrastructure investment at its purest.

“Municipal bonds were the original impact investment.” -Neighborly Founder and CEO, Jase Wilson

Now, we’re not overly fond of governments-as-customers. They are slow to procure, make oddly distorted purchase decisions, and are plagued by waste. But they offer ahuge market and are ripe for technological upgrades. Municipalities spend a lot of money on technology, and the US municipal bond market alone is in the $Trillions.

And, finally, it’s worth keeping in mind that governments and bond finance are industries which distinctly lack younger people working on forward-thinking solutions. If the majority of civil servants are approaching retirement and ingrained in older modes of thinking, then an upcoming generation will more likely usher in fresh systems with entirely new opportunities. Whatever the reasons, there is a sense of change on the horizon when it comes to how municipal bond-making happens.

At Bee Partners, we continue to be bullish on this greater path, but will be cautious about the velocity a startup can achieve from inception. Data aggregation and transparency will surely play stronger roles, and our communities will be more functional places as a result. All this to say, there’s plenty of room for innovation across all aspects of government and municipal finance, and definitely across the routes mapped out by our “Evaporation Theory!”